Challenger bank raises £387.5m from private investors and institutions to fund
further expansion

Metro Bank has raised almost £390 million through a private share offering as it delays plans to float on the London stock exchange until 2016.

The group, which was launched in 2010 as a challenger to the big four high street banks, had been eyeing an initial public offering (IPO) this year [2014] but decided to raise further funds privately following strong demand from both private investors and institutions.

Metro Bank said it has raised a further £387.5m at £13 a share - a 30pc premium to the share price at its last fundraising in June 2012. The transaction values the bank, which has 25 branches in London and the South East of England, at £770m and takes total funds raised so far to £641m, the group said.

Vernon Hill, Metro Bank’s billionaire co-founder and chairman, said the company had originally been targeting £250m but could have raised almost £500m following interest from investors on both sides of the Atlantic.

He said the bank had decided to postpone a stock market listing by a further two years to “maximise value”.

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“Lots of people in Metro wanted to put some more money in on a private stage and we thought we could maximise the value by doing the float in 2016,” Mr Hill said. “There was tremendous demand on both sides of the Atlantic. We have been here long enough to prove this service-focused model will work well in Britain.”

Metro Bank will shortly release its latest financial figures but Mr Hill said the group, which is attempting to woo UK customers by opening its branches for longer and on 362 days of the year, has grown deposits by 100pc compared to 2012.

Mr Hill declined to comment on when the bank would break even - it has lost more than £100m since opening its doors in July 2010 - but he insisted demand for both personal and businesses accounts has been “overwhelming”.

Metro Bank, famous for its “Dogs rule!” posters and free water bowls and biscuits for man’s best friend, now has 280,000 personal and business accounts and will open a further 12 branches this year. It eventually wants to reach 200 branches or “stores” as it prefers to call them.

The fundraising comes after Labour Party leader Ed Miliband unveiled plans to split Britain’s biggest banks and introduce a new legal threshold limiting the size of high street lenders in order to improve competition in the market.

Mr Hill would not comment on Mr Miliband’s proposals directly but he said he did not believe in further regulatory and government intervention in the market. “We believe in free market solutions giving the customer free market choice,” he said although he added that he “encouraged ideas that give the customer choice”.

“The British bank system up to this date has been more of the same. The customer hasn’t really had a real differentiated choice,” Mr Hill said.

Following the fundraising, for which by Bank of America Merrill Lynch and RBC Capital Markets acted as introduction agents, Metro Bank has a leverage ratio of 25pc and Tier 1 capital ratio of 63pc.

Metro Bank’s model is based on convenience and better customer service rather than competing to offer the best deals.

“No-one buys an Apple product because it’s the cheapest - it’s clearly not the cheapest, they are delivering a whole range of Apple experience,” said Mr Hill. “The Metro model is about convenience and service and we want to be fair on the pricing but we are definitely not out to be the highest rates.”